Topolánek: Modernization of Czech district heating plants will require over CZK 200 billion, state is not helping

Modernizing Czech district heating plants, whose operators will have to replace old coal-fired technologies with new heat sources and distribution networks by 2030, will require investment of over CZK 200 billion. Mirek Topolánek, chairman of the Czech District Heating Association, said this in Olomouc at the two-day Days of Heating and Energy conference, which opened today. The state is not yet providing appropriate support for the costly transformation of district heating, he said. There is a risk that delays in approving projects will set the modernization of district heating plants back, the former prime minister said.

“The state has essentially done nothing so far to advance the transformation of district heating that it demanded and that we have understood,” Topolánek said.

As an example, he said the cabinet has yet to approve an amendment to the law on emissions trading. The proposal responds to a revised EU directive requiring all revenues from allowances to be used for climate protection. The government has postponed consideration of the amendment twice this year because of disagreements between ministries over how to allocate the revenues. Emissions allowances are purchased by power plants, district heating plants and other industrial businesses that emit greenhouse gases, such as carbon dioxide, into the atmosphere. This year's revenues from allowances are estimated to exceed CZK 40 billion.

The transformation of district heating plants is funded through grants from the Modernisation Fund, which receives part of the proceeds from emissions allowances. According to Topolánek, district heating plants should have CZK 100 billion available from the fund, but falling allowance prices mean the actual amount will probably be up to a fifth lower. “This is not a gift from the state. According to our calculations, district heating plants will pay CZK 160 billion into this fund between 2021 and 2030,” Topolánek added. This means the plants will receive back only about two-thirds of their own money for investment projects to switch from coal to cleaner fuels, he said.

Petr Holub, director general of the Climate Protection Section at the Ministry of the Environment, said at the conference that falling allowance prices would reduce the revenues flowing into the Modernisation Fund from the originally estimated CZK 100 billion to CZK 70–80 billion. Grants worth CZK 70 billion have already been approved, he said. They relate to modernization projects worth a total of CZK 140 billion. “The next funding call will need to be very carefully targeted to determine where the money should go, unless the price of allowances rises or the programme receives additional revenue from emissions allowance auctions,” Holub said.

According to Topolánek, 55 district heating projects have so far applied to the Modernisation Fund programmes, seeking grants totalling CZK 74 billion. In the latest approval round, however, only four of the 17 projects were approved at the request of the European Investment Bank. If programmes focused on modernizing district heating plants are not approved in time for formal reasons, the target of phasing out coal in district heating by 2030 is at risk, Topolánek said. Deliveries of new gas turbines take several years. According to Topolánek, operating support for district heating plants and support for higher-capacity heat production from renewable sources are also stalled.